• Home
  • Start Here
  • Blog
  • Free Resources
  • Shop My Filofax Store
  • Shop TBM
  • Courses

The Budget Mom

Real Women. Real Life. Real Finance

  • Home
  • Products
    • Live Rich Planner
    • Budget By Paycheck
  • Blog
  • FREE RESOURCES
  • COURSES
  • Shop my Filofax store
  • Shop TBM
MENUMENU
  • BUDGETING
        • Categories

        • Budgeting Basics
        • Budget Guides
        • Budget Tips
        • Budget Recaps & Overviews
        • Living on a budget can be as challenging as sticking to a diet or committing to a workout routine. Here are tips to avoid burnout so you can achieve your goals!

          How to Avoid Budget Burnout: 5 Tips to Stay the Course

          When creating a budget, most of us focus on tracking our expenses, but tracking your income is just as important. This includes knowing your starting balance.

          What is Your Starting Balance & Why Does It Matter for Your Budget?

          Most of us have invisible money scripts that hold us back from reaching our financial goals. Learn what the three most common money beliefs are and how you can start taking steps to change them. 

          3 Money Beliefs That Might Be Holding You Back

  • SAVE MORE
        • Categories

        • Cut Expenses
        • Extra Income
        • Saving Tips
        • The true cost of a speeding ticket depends on your location, how fast you were driving, and any previous violations. Learn how much you can expect to pay after receiving a speeding ticket.

          Explained: The Surprising True Cost of a Speeding Ticket

          If you’re looking for ways to save, buying second-hand items might be a good idea. These 17 things are better to buy used instead of new.

          17 Things That Are Better to Buy Used Instead of New

          If you need to earn fast cash, selling household items online is the easiest way to do it. Here are 20 things in your home that you can sell right now.

          Need Cash Fast? 20 Things In Your Home You Can Sell Right Now

  • FRUGAL LIVING
        • Categories

        • Beauty & Health Tips
        • DIY
        • Family & Money
        • Food & Drink
        • Frugal Living 101
        • Household Tips
        • Holidays & Occasions
        • Kids & Money
        • Many people consider going to grad school but wonder if it’s worth the financial investment. Here are five questions you should ask yourself before committing to grad school.

          Should I Go to Grad School? 5 Things to Consider First

          Forget about a New Year’s Resolution! Try setting a New Year mindset instead. It might not seem like much, but your mindset can make or break your financial goals.

          How to Improve Your Financial Mindset to Achieve Your New Year’s Goals

          It’s not too early to start helping your child build their financial future. If you want to help your child start investing, here are the steps you’ll take to get started.

          How Can My Child Start Investing?

  • DEBT & CREDIT
        • Categories

        • Credit Cards
        • Credit Report & Score
        • Debt Basics
        • Get Out of Debt
        • Loans, Etc.
        • It’s easy to swipe a credit card, but paying it off is an entirely different story. Here’s what you need to know about the true cost of buying on credit.

          Revealed: The Ugly Cost of Buying on Credit

          Should You Buy Your Leased Car?

          Collection accounts can be stressful, but you can bounce back. Learn how to handle collection accounts and improve your financial picture.

          Has Your Debt Been Sent to Collections? Here Are Your Options.

  • FINANCE 101
        • Categories

        • Financial Planning
        • Investing
        • Retirement
        • Tax Tips
        • It might be tempting to withdraw investments, especially during times of economic uncertainty. However, most people should avoid touching their investments.

          The ONLY 3 Reasons to Touch Your Investments

          It’s that time of year again! Unfortunately, we’re not talking about the holidays. Now is the time for everyone to file their taxes. Here is what you need to know.

          2021 Tax Season: How to File for Taxes Online

          It’s not too early to start helping your child build their financial future. If you want to help your child start investing, here are the steps you’ll take to get started.

          How Can My Child Start Investing?

Budgeting Basics: Income VS Expenses

February 24, 2016
BUDGETING

Share4
Pin95
Share
Tweet
Email
99 Shares
  • Bio
  • Facebook
  • Pinterest
  • Latest Posts
Kumiko Ehrmantraut

Kumiko Ehrmantraut

Some links below are from our sponsors. Here's how we make money.
Kumiko Ehrmantraut
Kumiko Ehrmantraut

Kumiko Ehrmantraut

Kumiko Ehrmantraut

Latest posts by Kumiko Ehrmantraut (see all)

  • Should I Go to Grad School? 5 Things to Consider First - February 25, 2021

Figuring out where your money is going and how much you have to spend is the first step in creating a working budget. This article explains the budgeting basics - income and expenses.

 

Welcome to the first step in creating a budget! This might seem to be a pretty straightforward topic. However, some find this area challenging.

Knowing your income, in most cases, is pretty easy. You get paid on the 5th and 20th of the month, and it’s the same amount every paycheck. But what happens when you start to track income that is inconsistent?

Expenses is another topic that can seem pretty elementary. You pay $60 a month for your utilities and $40 a month on your phone bill – sounds like a cinch right?

Well let me be the first one to say, this is the area I struggled with the most. Pinpointing your spending is a much harder thing to do. Don’t worry – I’m here to help you with this crucial first step! There is one rule I want you to keep in your head as you read this post – ALWAYS budget for the worst case scenario! It’s ok. I will explain this a little later in the article!

  • Read: How to Create a New Budget Every Month: A Detailed Step-by-Step Guide

INCOME

 

If you have consistent income, yay for you! This step is easy.

Let’s talk about inconsistent income. The first step in dealing with irregular income is to create a monthly cash flow plan (I know I am getting into things I have not yet discussed – but bear with me).

This will be used to determine how much you “need” each month just to get by. So let’s discuss this little thing we call the cash flow statement – or commonly called the statement of cash flows.

This is merely a document that is used to record the amount of income you reasonably expect to bring in and the expenses that are going out.

These expenses should be listed in order of priority. Once you give weight to each of your expenses, it makes it easier to determine what has to be paid, versus what can be put on hold.

On any given month you might not be able to buy clothing or new shoes, but you'll know that your top priorities can be taken care of. What a significant relief right?

Try to mimic a steady paycheck as much as humanly possible. This is where that little rule I wanted you to remember comes into play – plan for the worst-case scenario.

On a piece of paper list the income you have received over the last two months and circle the lowest paycheck you received over that time frame. This is the amount you can use as a starting point and is the value you will use to cover all of your monthly expenses and top priorities.

  • Read: Have Irregular Income? Here's How to Budget For It

If one month you are not able to cover your monthly expenses with this value, you use the priorities you created above to eliminate some of the lower priority expenses.

Another option I am going to suggest when you are dealing with irregular income is to open a separate checking account (please, please, please check the fees at the bank you choose).

This bank account should be labeled as your paycheck account for your irregular paychecks. You will then withdrawal the predetermined amount you figured from the step before (refer to the above bold text).

This withdrawal will be consistent based on the time frame you choose to budget. Are you budgeting for every two weeks or every month? Deposit this amount into your regular personal checking account and pay your expenses. If your paycheck is higher than your predetermined amount, leave it in your paycheck account and let it grow to use for months your paycheck is lower than expected.

Dave Ramsey has some amazing PDF tools to help you get started with creating a cash flow statement!

Expenses

There are two fundamental terms I want to cover when talking about expenses:

Fixed Expenses: These are expenses in your monthly budget that never change. For example, your car payment will always be $250 a month. Your mortgage with always be $800 a month. The values of these expenses are what I like to call “in stone.” There is no option to reduce them, in most cases. Essential expenses are also usually the top priority expenses on your cash flow statement. These type of expenses are paid month-to-month without changing much in amount.

Examples of fixed expenses include:
• Rent/Mortgage
• Car Payment
• Life Insurance Premiums
• Cable/Internet

Variable Expenses: These expenses are the ones I like to discuss. Why? Variable costs are not set “in stone.” For example, one month you might spend $30 on clothes, the next month you might spend $400.

  • Read: I Tracked Every Penny I Spent for 30 Days and This Is What Happened

You have complete control over how much you spend on these items. That’s the fun part. If you are tight one month on your budget, you can tell yourself “ok, I don’t have enough money to spend $500 this month on groceries, so I will alter my meal plan and bring it down to $300.” This is a great thing – is it not? These expenses are usually on the bottom of the priority list (minus the food part- we all have to eat).

Example of variable expenses include:
• Clothes
• Food
• Entertainment
• Household Items

Once you are aware of all the things you spend your money on, you should be able to categorize your spending into Fixed and Variable expenses and then prioritize them.

There are a few more pointers I want to touch base on with expenses.

Each month might vary. This can get frustrating for some people (you know who you are). You want to see the same thing happening every month and for things to be consistent. With this attitude, you are more likely to fail, and I can’t have that.

Remember, this is what we call life. It happens, and unexpected things arise. That's why it's so important to budget for emergency savings. It's ok for your budget not to work one month. Pick yourself up and start fresh next month. I believe in you!

Each cent of your income should have a job. Whether that is paying for a bill or taking care of a “want” item, it must have a purpose.

You are more likely not spend money if the money you have is already allocated for another purpose. At the very end, when you add up your income, and you subtract it from all your expenses, it should be $0. If not, grab that calculator, and check again. You might have to make adjustments.

Your expenses do NOT have to have 1000 categories. Make it simple for yourself! Here are the categories I use in my budget:
• Bills
• Food
• Clothing
• Entertainment
• Everything Else (low low priority)

  • Read: Personal Budget Categories (Organizing Your Budget)

See? Keeping it simple is keeping it real. Don’t get overwhelmed by the details. If you need to make adjustments in your budget, the one place to go are those variable expenses. Remember, you control those values, so they will be easy to alter.

Figuring out where your money is going and how much you have to spend is the first step in creating a working budget.

Share4
Pin95
Share
Tweet
Email
99 Shares

Filed Under: BUDGETING, Budgeting Basics Tagged With: BUDGET, BUDGET BASICS

Previous article:
« 4 Budgeting Myths You Should Ignore
Next article:
No New Clothes For An Entire Year-My Personal Journey »

Trackbacks

  1. The Ultimate Guide to the Cash Envelope System | The Budget Mom says:
    September 1, 2016 at 10:03 pm

    […] Related: Budgeting: Income VS Expenses […]

  2. 3 Tips To Improve Family Finance | The Budget Mom says:
    September 3, 2016 at 10:31 am

    […] sure you are both on the same page when it comes to spending money. Figure out your expenses, and communicate with your spouse. Designate a time every week, every two weeks, or every month to […]

  3. START SAVING Challenge Day #7: Be A Budget Rockstar | The Budget Mom says:
    September 3, 2016 at 11:31 am

    […] Here is another resource that I think might help you with this challenge: Income VS Expenses […]

  4. How To Budget When You Are A Spender | The Budget Mom says:
    September 4, 2016 at 10:54 am

    […] really have to know where your money is going. Make sure to check out my Income VS Expenses post here to help you figure out where your money is actually going. One of the most important parts of a […]

  5. Types of Mom Blogs | Breaking Even Communications says:
    August 22, 2017 at 8:28 am

    […] Example: Budgeting: Income (yay) vs. Expenses (yuck) […]

Hello, I'm Kumiko, but everyone just calls me Miko. Welcome to my blog, The Budget Mom. I am an Accredited Financial Counselor® , and mom to a rambunctious boy. Come along with me as I strive to live a life I love on a budget that I can afford. Read more about me.

RECENT YOUTUBE VIDEO

Free Resource Library

Recent Posts

  • Should I Go to Grad School? 5 Things to Consider First
  • The ONLY 3 Reasons to Touch Your Investments
  • Explained: The Surprising True Cost of a Speeding Ticket
  • How to Avoid Budget Burnout: 5 Tips to Stay the Course
  • 17 Things That Are Better to Buy Used Instead of New

Blog Categories

Amazon Associates Disclosure

The Budget Mom, LLC is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.

About

  • Home
  • ABOUT TBM
  • Contact
  • Start Here

Important

  • DISCLAIMER
  • PRIVACY POLICY
  • Subscribe

Favorites

  • YouTube
  • Blog
  • Live Rich Planner
  • Budget by Paycheck

Start With My Friday Newsletter

Copyright ©2021, The Budget Mom®
This website contains affiliate links, which means that if you click on a product link, I may receive a commission. This website is a participant in the amazon services llc associates program, an affiliate advertising program where I earn advertising fees by linking to amazon.com.